Russia and Iran have agreed to transport Russian gas to Iran through Azerbaijan. While the route has been set, negotiations on the supply cost are ongoing.
This was announced by Russian Energy Minister Sergei Tsivilev following the summit talks between the Presidents of Russia and Iran at the Kremlin on 17 January.
“The route through Azerbaijan has been agreed upon,” Tsivilev emphasized. “We are currently in the final stages of negotiations – price approval, while the supply volumes have already been determined.”
He further noted that “pricing is always a matter of commercial negotiation and finding a mutually agreeable solution. To this end, working groups have been established on both sides, and experts are actively developing a pricing approach.
According to the Russian Energy Minister, the basic pricing principle is to equate the calorific value of oil and gas, adjusted by a specific coefficient. However, both Russia and Iran still hold differing views on this matter.
Regarding supply volumes, initial deliveries are expected to be modest, starting at up to 2 billion cubic meters. “We believe we should start small with up to two billion cubic metres, but with an option to eventually increase annual shipments to Iran to up to 55 billion cubic metres of gas,” stated President Putin during a press conference following his meeting with President Masoud Peseshkian.
Possible route
Meanwhile, the news reports do not mention which infrastructure will be used for gas supplies along the Russia–Azerbaijan–Iran route. It remains unclear whether a new pipeline will be constructed or existing pipelines will be upgraded.
Separately, Pezeshkian expressed willingness to “upgrade the supply route.” He stated, “We have discussed the routes for delivering materials, energy, or any goods. We need robust supply chains. To achieve our shared vision and goals, we need to upgrade the routes for delivering fuel and energy. This is an issue our colleagues have been working on for a long time now, and we are prepared to renew and restore the necessary supply infrastructure.”
What infrastructure can provide gas supplies from Russia to Azerbaijan and Iran?
Two key pipelines could potentially facilitate gas supplies from Russia to Azerbaijan and Iran:
- Novo-Filya (Russia) – Baku (Azerbaijan) Gas Pipeline: This 200km pipeline, built during the Soviet era, has a capacity of 10 billion cubic meters per year. It runs along the Caspian Sea coast and can operate in reverse mode. It forms part of the larger Mozdok-Hajigabul gas pipeline system.
- Hajigabul (Azerbaijan) – Astara – Abadan (Iran) Gas Pipeline: This 1,474.5km pipeline, also a Soviet-era construction, connects Azerbaijan to Iran. It has a capacity of 10 billion cubic meters per year but is currently inactive.
To enable significant Russian gas supplies, substantial investments in modernizing the entire pipeline system would likely be necessary. However, such investments would only be justifiable if there is a consistent demand for Russian gas at the end of the pipeline chain. Which market will ultimately absorb Russian gas delivered through this route?
Another step towards the realization of the idea of a gas hub
Iran has some of the world’s largest reserves of natural gas and crude oil, ranking second in proven gas reserves and fourth in proven crude oil reserves. The energy giant is facing a shortage of energy resources, but it is not necessarily that Russian gas is needed only to cover the shortage in the northern provinces.
Iran’s ambitions, as is well known, go beyond meeting domestic needs. The country aspires to become a gas hub that would meet the energy needs of the Middle East and South Asia. The potential geography of users is quite extensive – Pakistan, India, Iraq, Türkiye.
However, in order for these ambitions to be realized, first of all, Iran needs to establish reliable political agreements and contracts with other major regional gas producers, such as Russia and Turkmenistan.
Iran holds talks with Russia, Turkmenistan on gas cooperation:
Turkmenistan-Iran Gas Deal – Exclusive conversation with Ambassador of Iran in Turkmenistan:
In July last year, Iran and Turkmenistan signed a gas contract under which up to 10 billion cubic meters of gas per year will be supplied from Turkmenistan to Iraq through Iran under the swap scheme. The contract also provides for an increase in gas supplies to Iran (up to 40 billion cubic meters per year), the construction by Iranian companies of a 125-kilometer gas pipeline and three compressor stations in Turkmenistan. ///nCa, 20 January 2025